Weighing the Options of Refinancing

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Have you ever heard the old rule of thumb that states you should only consider refinancing if the new interest rate is at least 2 points lower than your existing rate? That may have been accurate a while back, but with refinancing dropping in cost in recent years, it's a good time to consider a new mortgage! A refinanced mortgage can be worth its cost several times over, factoring in the advantages that it brings, in addition to a reduced interest rate.


When you refinance, you may be able to reduce the interest rate and mortgage payment , perhaps significantly. Additionally, you might have the option of pulling out some of your home equity by "cashing out" a sum of money to renovate your home, consolidate debt, or take your family on a vacation. You may have the option to refinance to a shorter-term mortgage loan, enabling you to add to your equity faster.

Expenses and Fees

All these advantages do cost something, though. When you refinance, you're paying for many of the same things you paid for during your current mortgage. Included in your costs will typically be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other expenses.

Doing the Math

You might need to pay discount points (prepaid interest) to get a lower interest rate. When you pay (on average) three percent of the mortgage loan amount up front, the savings for the term of the new mortgage can be significant. You might be told that these points may be deducted on your income taxes, but since tax regulations can be difficult to keep up with, please consult with a tax professional before depending on this.

Another cost that a borrower may consider is that a reduced interest rate will lower the interest amount you'll deduct on your federal income taxes. Call us at (207) 571-8034 to help you do the math.

Ultimately, for most the total of up-front costs to refinance will be made up very quickly in monthly savings. We can help you find out your options, considering the effect a refinance may have on your taxes, how likely you may be to sell in the next couple of years, and your cash on hand. Call us at (207) 571-8034 to get you started.

Want to know more about refinancing your home? Give us a call at (207) 571-8034.